Uncovered Options Trading System
Abandon is election not to exercise or offset a long option position.
Accommodation Trading is non-competitive trading entered into by a trader, usually to assist another with illegal trades.
Actuals is the physical or cash commodity, as distinguished from a futures contract.
Agency Bond is a debt security that is issued issued by a government-sponsored enterprise, designed to resemble a U.S. Treasury bond.
Agency Note is a debt security that is issued by a government-sponsored enterprise, designed to resemble a U.S. Treasury note.
Aggregation is the principle under which all futures positions owned or controlled by one trader (or group of traders acting in concert) are combined to determine reporting status and compliance with speculative position limits. In other words, Aggregation is the policy under which all futures positions owned or controlled by one trader or a group of traders are combined to determine reportable positions and speculative limits.
Agricultural Trade Option Merchant is any person that is in the business of soliciting or entering option transactions involving an enumerated agricultural commodity that are not conducted or executed on or subject to the rules of an exchange.
Allowances is the discounts (premiums) allowed for grades or locations of a commodity lower (higher) than the par (or basis) grade or location specified in the futures contract. See Differentials.
American Option is an option that can be exercised at any time prior to or on the expiration date in opposite European Option could be exercised only at its expiration date.
Approved Delivery Facility could be any bank, stockyard, mill, storehouse, plant, elevator, or other depository that is authorized by an exchange for the delivery of commodities tendered on futures contracts.
Arbitrage is the simultaneous purchase and sale of similar commodities in different markets to take advantage of a price discrepancy. In more detail, Arbitrage is a strategy that involves the simultaneous purchase and sale of identical or equivalent commodity futures contracts or other instruments across two or more markets in order to benefit from a discrepancy in their price relationship. In a theoretical efficient market, there is a lack of opportunity for profitable arbitrage.
Arbitration is the process of resolving disputes between parties by a person or persons (arbitrators) chosen or agreed to by them. The National Futures Association (NFA) arbitration program provides a forum for resolving futures-related disputes between NFA members or between NFA members and customers. Other forums for customer complaints include the American Arbitration Association.
Artificial Price is a futures price that has been affected by a manipulation and is thus higher or lower than it would have been if it reflected the forces of supply and demand.
Asian Option is an exotic option whose payoff depends on the average price of the underlying asset during some portion of the life of the option.
Ask is the price level of an offer, as in bid-ask spread. The ask price is a price at which that a trader is willing to sell an owned conmoddity.
Assignable Contract is a contract that allows the holder to convey his rights to a third party. Exchange-traded contracts are not assignable.
Assignment is designation by a clearing organization of an option writer who will be required to buy (in the case of a put) or sell (in the case of a call) the underlying futures contract or security when an option has been exercised, especially if it has been exercised early.
Associated Person is an individual who solicits or accepts (other than in a clerical capacity) orders, discretionary accounts, or participation in a commodity pool, or supervises any individual so engaged, on behalf of a futures commission merchant, an introducing broker, a commodity trading advisor, a commodity pool operator, or an agricultural trade option merchant.
At-the-Market order is an order to buy or sell a futures contract at whatever price is obtainable when the order reaches the trading facility.
At-the Money options is an option whose strike price is equal (or approximately equal) to the current market price of the underlying futures contract. When an option's strike price is the same as the current trading price of the underlying commodity, the option is considered at-the-money option.
Auction Rate Security is a debt security, typically issued by a municipality, in which the yield is reset on each payment date via a Dutch auction.
Audit Trial is the record of trading information identifying, for example, the brokers participating in each transaction, the firms clearing the trade, the terms and time or sequence of the trade, the order receipt and execution time, and, ultimately, and when applicable, the customers involved.
Automatic Exercise is a provision in an option contract specifying that it will be exercised automatically on the expiration date if this options contract is in-the-money by a specified amount, absent instructions to the contrary.
Back Month is futures delivery months other than the spot or front month (also called deferred months).
Naked options trading is very risky - many people lose money trading them. It is recommended contacting your broker or investment professional to find out about trading risk and margin requirements before getting involved into trading uncovered options.